Each week, Private Banker International selects a deal that highlights the biggest trends and themes in the sector. It may not always be the largest deal in value, or the highest profile, but it will tell us where the leading companies are focusing their efforts, and why. 

The deal

Provider of fund, corporate, and private client services JTC has signed a definitive agreement to acquire TC3 Group Holdings, which trades as South Dakota Trust Company (SDTC).

The deal is worth a maximum consideration of $270m made up of $200m initial consideration of $147m in cash and maximum $53m in new JTC ordinary shares.

In addition, there is a further earn out of up to $70m payable in cash and JTC ordinary shares after certain targets are met.

The deal is subject to US merger control and regulatory approval.

Why it matters

Nigel Le Quesne, CEO of JTC, said: “SDTC is a great addition to the JTC Group.  It is a market-leader in the fast-growing personal trust market in the US, which in turn is the largest in the world. It has a highly committed, service-focused team with deep client relationships, an outstanding track record of profitability and growth, and is hugely complementary to our existing US operations, particularly our existing South Dakota business and building on our acquisition of NYPTC last year.  Not only does it bring us greater scale in the US, it also provides significant opportunities to offer our wider private client services to their high net worth and ultra-high net worth family clients.  The acquisition also very much delivers on our previously announced strategy to grow a market leading US personal trust business.  We are delighted to welcome SDTC’s valued colleagues, clients and partners and very much look forward to the significant opportunities ahead of us in this exciting growth market.”

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Al W. King III, co-founder and co-chief executive officer of SDTC, added: “We are delighted to join JTC.  We have an enormous amount in common including our commitment to our clients, our culture and our professional expertise.  We know the JTC team well having worked with them for over seven years, and see significant opportunities to expand our combined offering to clients and their advisers, so that we can meet more of their needs in this fast growing private client market.”

The detail

  • SDTC provides access to a sticky client base of c.1,700 high net worth and ultra-high net worth clients with a large intermediary network;
  • SDTC has a compelling financial profile with a 22-year track record of consistent growth, high margins and strong cash conversion;
  • Fixed annual recurring fees and very low client churn (c.3% per annum) provide excellent revenue visibility and predictability, with 98.3% client revenue retention;
  • Establishes JTC as the leading independent provider of administration services (combined $152bn Assets under Administration (“AuA”) to the US personal trust market;
  • Significantly strengthens JTC’s US business, creating a platform for growth as the Group prepares to start its next multi-year business plan, the Cosmos era;
  • SDTC has been known to JTC since 2016 and both share strong cultural alignment with a focus on service excellence, and
  • Acquisition is accretive to Group organic growth and margins, and is expected to deliver mid-single digit EPS accretion to Group EPS from FY24 based on the proposed funding structure.